North Carolina Department of Justice
North Carolina Department of Justice
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AG Cooper marks fifth anniversary of NC's landmark lending law

Release date: 8/18/2004

RALEIGH: Attorney General Roy Cooper today marked the fifth anniversary of North Carolina’s landmark predatory lending law, which has protected thousands of consumers from unfair loans and saved them more than $500 million.

“North Carolina’s law works because it is tough but fair,” said Cooper. “It allows lenders to make credit widely available for people, but it also protects consumers from abusive practices that can rob them of their home.”

North Carolina’s predatory lending law, which Cooper authored as a state senator, limits prepayment penalties and bans practices such as loan flipping and packing of single premium credit insurance into loans. The law was the first of its kind in the country when it was enacted five years ago. Since North Carolina enacted its law, thirty other states have passed their own anti-predatory lending laws, many of them based on the North Carolina model. Recent predatory lending legislation introduced in Congress is also based on North Carolina’s law.

Cooper noted that the banking industry played a critical role in developing the law and that it has proven effective without restricting consumers’ access to loans. Studies conducted by the Kenan-Flagler Business School of the University of North Carolina at Chapel Hill (http://www.kenan-flagler.unc.edu/KI/commCapitalism/publications.cfm) and the Center for Responsible Lending (http://www.responsiblelending.org/predlend_nc/index.cfm) show that the worst predatory lending practices have been stopped under the state law while subprime mortgage credit remains freely available to North Carolina consumers. Base d on the earlier study by the Center for Responsible Lending, the Attorney General’s office estimates that North Carolina consumers have saved a total of more than $500 milli on since the law took effect.

As Attorney General, Cooper has taken action against unfair lending practices, winning $20 million in refunds for North Carolina mortgage holders as part of a 2001 settlement with The Associates. Cooper also helped negotiate a 2002 multistate settlement with Household Finance with provisions that closely mirror North Carolina’s predatory lending law. Consumers nationwide received refunds of $484 million as a result of that settlement, including $11 million for North Carolina residents.

The success of North Carolina’s predatory lending law and similar laws patterned after it in other states is now threatened by new federal banking rules, Cooper said. He and other attorneys general have urged Congress to block sweeping new rules by the Office of the Comptroller of the Currency that would make it harder for states to protect consumers. All 50 state attorneys general oppose the rules.

Testifying before the US Senate Banking Committee in April, Cooper outlined his opposition to the new rules under which national banks and their subsidiaries no longer have to abide by state laws or be subject to state enforcement. Cooper told the committee that the proposed OCC rules weaken important protections for consumers, undermine state efforts to fight predatory lending, and interfere with states’ rights to enforce their laws against banks doing business within the state.

“We must not let Washington dismantle strong state laws that protect consumers, and we will fight these rules every step of the way,” said Cooper.

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